DCIT -CC-1(4), MUMBAI vs. ULTRATECH CEMENT LTD. , MUMBAI

Grounds raised by the assessee are as under: 1) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) has erred in upholding the disallowance u/s 80IA amounting to Rs.82,61,81,708 for Rail Systems and Rs. 18,91,43,054 for Power Plants. He erred in holding that in respect of Rail Systems and Power Plants transferred from Samruddhi Cement Limited to the appellant Company pursuant to the scheme of amalgamation, the deduction is not allowable as per the provisions of section 80IA(12A) of the income Tax Act 1961. 2) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax (Appels) has erred in upholding the disallowance of additional depreciation spilled over from earlier year amounting to Rs 24,12,51,789 u/s 32 (1) of the IT Act in respect of assets was put to use for less than 180 days in FY 2009- 10. 3) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) has erred in denying the claim of R&D expenses under section 35(2AB) amounting to Rs. 7,50,139. 4) On the facts and in the circumstances of the case and in law, the learned Commissioner of Income tax (Appeals) has erred in not allowing full credit of TDS / TCS, claimed on the basis of certificates filed by the appellant Company. 5) The Appelant craves leave to add, alter, amend or delete the aforesaid grounds of appeal from time to time as it may be advised upto the date of hearings.

The grounds taken by the revenue are as under: 1) On the facts and in the circumstances of the case and in law, the Ld. LD CIT(A) erred, in holding that the sales tax exemption benefits of Rs. 19,99,06,000/ - are capital receipts not liable to income tax. 2) On the facts and in the circumstances of the case and in law, the Ld. LD CIT(A) erred, in holding that the sales tax exemption benefits of Rs. 19,99,06,000 / -are capital receipts not liable to

Since most of the grounds raised by the Revenue are already covered in the assessee’s own case in earlier years by the orders of Coordinate Bench of this Tribunal, we shall take the revenue’s appeal and the cross objection filed by UTCL, first. 5. Ground nos.1 and 2 of the Revenue’s appeal relate to the claim of the assessee in treating the sales tax exemption benefit received, amounting to Rs.19,99,06,000/- as capital receipts not liable to tax. Ground no.1 of the assessee’s cross objection is connected with this claim. 6. This issue has been subject matter of appeal in the assessee’s own case from AY 2004-05 onwards and has been decided in favour of the assessee from AY 2004-05 onwards. The latest order on this issue is for AY 2010-11 in ITA No. 7614/Mum/2014 and 7631/Mum/2014 dated 5 April 2017 wherein the Coordinate bench has followed the decisions in earlier years and allowed the plea of the assessee. The Coordinate Bench held as under: “99. We have considered rival contentions and carefully gone through the orders of the authorities below as well as the order passed by the Tribunal in assessee’s own case in the A.Y.2004-05 to 2006-07. We found that exactly similar issue was considered in detail by the Tribunal and after discussing various judicial pronouncements held that subsidy so received by the assessee was capital in nature, therefore not liable to tax as revenue receipt.”

Since the facts and circumstances with regard to this claim of the assessee remain same in this year, following the orders of Coordinate Bench in assessee’s own case for earlier assessment years, especially for AY 2010-11, we uphold the action of the LD CIT(A) and dismiss this ground raised by the Revenue.

Further, the Hon’ble Supreme Court has also dismissed the Revenue’s Special Leave Petition (SLP No. 19601/2018) vide order dated 9th July 2018 for AY 2008-09 and upheld the order of the Hon’ble Bombay High Court.

We have carefully gone through the order of the AO. He has not pointed out any errors in the amount of disallowance offered by the assessee u/s.14A of the IT Act. The facts in the present case are similar to the facts in the earlier years. For the year under consideration, the disallowance offered by the assessee is in respect of salary cost of the employees looking after the investment activities amounting to Rs.58,84,137 and the indirect cost amounting to Rs.12,66,049 relating to such employees. Therefore, following the decision of Coordinate Bench of this Tribunal in assessee’s own case for earlier year and the

Ld Counsel for the assesse Sri. Nishant Thakkar, briefly stated the following facts involved in the appeal for the assessment year 2011-12. The assessee had filed its original return of income on 25.11.2011, which was subsequently revised on 12.03.2013. Thereafter, notice u/s 153C r.w.s. 153A of the IT Act dated 26.11.2014 was issued by the Dy.

Ground no.1 of the appeal filed by the assessee relate to disallowance of claim made by the assessee amounting to Rs.82,61,81,708 for rail system and Rs.18,81,43,054 for power generation. The AO has held that the undertakings which were transferred to the assessee from Samruddhi Cement Limited pursuant to the scheme of amalgamation are not eligible for tax holiday benefit under section 80IA in view of the provisions of sub-section (12A) of section 80IA of the IT Act.

Before we get into the merits of the claim of the assessee, it is important to understand the facts in the case before us. i. The assessee is a subsidiary of Grasim Industries Limited (Grasim) with the promoter holding of more than 60%. ii. During the financial year 2010-11, as per the Scheme of Amalgamation duly approved by the Hon’ble High Courts of Bombay and Gujarat, Samruddhi Cement Ltd. (SCL) was amalgamated with the assessee w.e.f. 01.07.2010 (appointed date). The amalgamating company, viz. SCL was a 100% subsidiary of Grasim.

The AO disallowed the claim of the assessee in respect of these Rail systems and power undertakings inherited by the assessee from SCL under the scheme of amalgamation, invoking the provisions of sub- section (12A) of Section 80-IA. In this regard, the AO relied on the Memorandum explaining the provisions of Finance Bill, 2007 which reads as under: “The existing provisions of section 80-IA provide for 100 per cent deduction for ten years in respect of profits and gains of certain undertakings or enterprises engaged in the business of development, operation and maintenance of infrastructure facility, industrial parks and special economic zones or generation, distribution or transmission of power, laying and operating and similar benefit is proposed for laying and operating a cross-country natural gas distribution network, including gas pipelines and storage facilities being an integral part of the network, etc.

The LD CIT(A) upheld the view taken by the AO and noted that amendment provision brought in by the Finance Act, 2007 is free from any ambiguity and pursuant to such amendment, deduction under section 80IA becomes impermissible for the amalgamated company in respect of the undertakings inherited under the scheme of amalgamation.

The Ld AR of the assessee, at the outset submitted that it is sub-section (1) of section 80IA of the IT Act, which confers the benefit of tax holiday to the eligible undertakings and sub-section (4) prescribes various businesses for which the undertakings / enterprises are eligible for tax holiday. All the other sub-sections of section 80IA prescribe conditions for the allowance, computation mechanism, extent and period of deduction, options to choose the period of deduction, procedural compliance etc. 28. The Ld AR took us through the provisions of sub-section (1) and submitted that the benefit of tax holiday, as envisaged u/s.80IA, is

According to the Ld AO as well as Ld CIT(A), sub-section (12) of section 80IA of the IT Act, which was inserted by the Finance Act, 1999, with effect from 1st April 2000 was an enabling provision and facilitated the successor to claim the benefit of the tax holiday in the year of reorganisation and thereafter. The Ld AR of the assessee on the other hand, argued that sub-section (12) merely made it explicit what was implicit u/s. 80IA of the IT Act. It, however, made subtle change by providing that in the year of reorganisation, the deduction, which is attached to the undertaking, would not be available to the predecessor company, but such deduction will be available to the successor company.

According to the Ld AR of the assessee, sub-section (12) was introduced merely with the intention to put to rest the divergent views taken by the authorities on this issue. It was also pointed out that sub-section (12) to section 80IA did not confer any new right to an assessee to claim the deduction. Sub-section (12) merely clarified that the successor company

The Ld AO as well as Ld CIT(A) are of the view that with the introduction of sub-section (12A), since the provisions of sub-section (12) shall not apply to the undertakings or enterprises which are transferred in the scheme of amalgamation or demerger after 31-3-2007, the statute has disabled the enabling provision enshrined in sub-section (12) of Section 80IA of the IT Act.

The Ld AR of the assessee on the other hand, as aforementioned, argued that sub-section (12) of section 80IA did not create any new right of tax holiday to the successor entity at the first place. Thus, insertion of sub-section (12A) in section 80IA of the IT Act, which merely disabled the applicability of sub-section (12), cannot be construed as withdrawal of right to claim the deduction by the successor.

The Ld AR of the assessee further argued that sub-section (12A) was introduced merely to neutralise the abnormalities brought into the statue by sub-section (12) of section 80IA. According to Ld AR of the assessee following anomalies had arisen on account of introduction of sub-section (12) in section 80IA of the IT Act:

According to the Ld AR of the assessee, the intent of introduction of sub-section (12A) was never to deny the deduction to the eligible undertakings but it merely restored the position of law as it was before insertion of sub-section (12) in section 80IA. This is clear from the wordings used in sub-section (12A) viz: the provisions of sub- section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31-3-2007

The Ld AR further submitted that sub-section (12) was in fact a disabling provision as it disabled the predecessor entity from claiming deduction in the year of amalgamation on a pro-rata basis. Therefore, sub-section (12A) merely negates the effect of such disabling provision and it does not restrict the eligibility of an undertaking to claim deduction under section 80IA of the IT Act which is granted under sub-section (1) of section 80IA of the IT Act.

The Ld AR also submitted that the Scheme of amalgamation under which the undertakings have been transferred to the assessee clearly provided that the associated benefits/ available deductions including tax holiday claims u/s.80IA will vest in the amalgamated entity i.e. assessee. The Scheme has sanction of the High Court of Bombay as well as High Court

Without prejudice to the above arguments, the Ld AR of the assessee also submitted following additional arguments in support of claim:

The Ld DR on the other hand referred to the CBDT Circular no.3 of 2008 dated 12 March 2008 wherein the CBDT has explained the purpose behind introduction of sub-section (12A) in section 80IA. According to

In the rejoinder, the Ld AR of the assessee submitted that the interpretation of CBDT is contrary to the plain reading of sub-section (12) or (12A), as also the explanatory memorandum to the Finance Bill, 1999 by which sub-section (12) was introduced in the statute and Finance Bill, 2007 by which sub-section (12A) was introduced in the statute. It was further argued that Circulars issued by CBDT are not binding either on the assessee or on the Courts/ Tribunals for the purpose of interpretation of law especially when the language used in the statute is plain and unambiguous. Reliance was placed in this regard on the Supreme Court Ruling in the case of Ratan Melting & Wire Industries (Civil Appeal No.4022 of 1999).

Even otherwise, the Ld AR of the assessee was of the view that, in the present case such deduction cannot be denied to the assessee since the assessee has considered the fair value of the undertakings for the purpose of amalgamation and has paid appropriate consideration by way of issue of shares, to the shareholders of SCL. Thus, the assessee has assumed full entrepreneurial risk of investment and operations of

We have carefully gone through the orders of the lower authorities / materials placed before us and considered the arguments of both parties. Grievance of both parties revolve around eligibility of tax holiday claim for units acquired by the assessee Company from SCL pursuant to the Scheme of amalgamation.

Before getting into the merits of the dispute, it is worthwhile to briefly touch upon the legal provisions concerning allowability of deduction under section 80IA of the IT Act.

Sub-section (1) to section 80IA allows the deduction, in respect of the profits derived from the eligible business (as specified in the section, which includes certain eligible business), in accordance with and subject to the provision of the section. The relevant section is reproduced below: “[1] Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub- section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of the section, be allowed, in computing the total income of the assessee, deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years”.

Sub-section (4) of section 80IA provides as under: any enterprise carrying on the business of (i) developing or(ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions namely :- (a)…

Sub-section (4) provides that the benefit of deduction is attached to an ‘enterprise’ or an ‘undertaking’ and not to the owner thereof. There is no dispute on this aspect that the deduction u/s.80IA is attached to an enterprise or an undertaking.

The Hon’ble Madras High Court in the case of Madras Machine Tools Manufacturers Ltd. vs. CIT [1975] 98 ITR 119 while dealing with the question as to whether applicability of deduction under section 84 has to be with respect to a particular undertaking or to the company in general, held as under: “15. … It is not the manufacture or production of articles by the company but the manufacture or production by the undertaking, which is different from the company, that is contemplated under the sub-section. A company may own or run many undertakings some of which may be entitled to the benefit of Section 84 and others may not be so entitled. It is not, therefore, possible to equate the undertaking with the company. When a company owns more than one undertaking the application, of Section 84 has to be with respect to the particular undertaking and not to the company in general…”

A corollary can also be drawn from the provisions of section 10A which provides for deduction to undertakings deriving profits from export of specified article or software. The language used in section 10 is similar to section 80IA where the deduction is prescribed for an undertaking. The Hon’ble jurisdictional High Court in the case of CIT vs. Sonata Software Ltd. [2012] 343 ITR 397 dealing with the issue relating to eligibility of the successor entity which had acquired the eligible undertaking on slump sale basis to claim deduction under section 10A, held as under: “11. The Tribunal in the present case has come to the conclusion that where a running business is transferred lock, stock and barrel by one assessee to another assessee the principle of reconstruction, splitting up and transfer of plant and machinery cannot be applied. According to the Tribunal the benefit of Section 10A attaches to the undertaking and not to the assessee which owns the undertaking. The benefit of Section 10A was held to have attached itself to the STP unit of the software division which was owned by IOCL till 19 October 1994 and it was owned by the assessee subsequent to that date. What is material, according to the Tribunal, is not who owns the undertaking but whether the undertaking is entitled to the benefit available under Section 10A…”

Thus, there is no dispute that the deduction under section 80IA(1) r.w.s. 80IA(4) is available to an undertaking or an enterprise and not to the

Sub-section (12) providing for allowance of deduction in case of a transfer of undertaking, pursuant to amalgamation or demerger, was inserted in section 80IA by the Finance Act, 1999, with effect from 1st April 2000 and read as follows: “(12) Where any undertaking of an Indian company which is entitled to the deduction under this section is transferred, before the expiry of the period specified in this section, to another Indian company in a scheme of amalgamation or demerger – (a) no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place; and (b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place”.

As per sub-section (12) of section 80IA of the IT Act:

Sub-section (12) of section 80IA of the IT Act, uses the word ‘undertaking’ signifying that it applies to an undertaking and not to a taxpayer or owner of the undertaking. It provided that in case of amalgamation/demerger, the benefit will flow to the assessee which acquires the undertaking. It is hence important to understand the purpose of introduction of sub-section (12) in the statute.

The Memorandum explaining the provisions of the Finance Bill, 1999, stated that the insertion of sub-section (12) in the statute was to neutralise the tax effects of a business reorganisation. Relevant portion of the Memorandum explaining the provisions of the finance Bill was as follows: “86. With growing liberalisation of the economy has come the need for industrial restructuring so that companies can focus better on their core activities. The corporate sector has been voicing the need for a flexible fiscal policy for regulating business reorganisations. In response to this need, I propose a comprehensive set of amendments to the Income tax Act to make such business reorganisations fully tax neutral. ... 87. ... Further, it is proposed that all fiscal concessions will survive for the unexpired period in the case of amalgamation and demergers". (Extracts from the speech of Finance Minister)”

The amendment was subsequently explained in more detail by the CBDT in Circular No. 779 dated 14-09-1999 under the head Business re- organization – Extensive amendments in relation to amalgamation demerger and slump sale. Relevant portion of the Circular is extracted below: “56.1 The business and economic environment of the country has thrown up the need for simplification and rationalisation of laws relating to business re- organization, for rationalisation of the production system and better utilization of resources which have become necessary with a view to enabling the Indian industry to restructure itself to become globally competitive. It was in this background that the tax concessions to conversion of firms into companies or proprietary concern into companies were provided in Finance (No.2) Act, 1998 and were widely welcomed. Following this up, the Act has carried out a number of amendments for the entire gamut of business reorganisation. These include rationalisation of the existing provisions relating to amalgamation of companies, new provisions relating to demerger of companies and sale or transfer of business as a going concern through slump sale.

The issue about eligibility to claim tax holiday/deduction of the eligible undertaking by a successor, (not necessarily in the context of 80IA but other similar tax holiday provisions) had arisen number of times for adjudication before the Courts prior to insertion of sub-section (12) in section 80IA of the IT Act. We observe that the Courts have taken a consistent view that the deduction was allowable for the residual period to the successor company.

In CIT vs. Silical Metallurgic Ltd (324 ITR 29), the facts before Hon’ble Madras High Court were as follows: there were three units at different places being new industrial undertakings eligible for deduction under the applicable provisions. They belonged to different companies assessed separately. The companies were amalgamated into one and the amalgamated company continued to carry on the business of the undertakings. It claimed the deduction of tax holiday for all the eligible undertakings. The AO disallowed the deduction on the ground that it did not set up the aforesaid units and there was no provision in the Act for granting the benefit of deduction to the amalgamated company.

The CBDT had also accepted the above legal position with regard to deduction under section 84 of Income Tax Act, 1922 (Section 80J of Income-tax Act, 1961), way back in 1963 and clarified the matter vide

The Board set out two principles (prima facie, independent of one another or the later dependent on the primary and the first principle):

The aforesaid Board Circular have been relied upon by various Courts and its applicability have been upheld. The Hon’ble Allahabad High Court in the case of Prisma Electronics [2015] 377 ITR 207 was concerned with deduction under section 80-IB on conversion of proprietorship concern into partnership firm. In this regard, it was held as under: “11. From a perusal of the aforesaid provision, it is clear that Section 84 is more or less the same as provided in Section 80-IB of the Act. The Central Board of Direct Taxes issued a circular F. No.15/5/63-IT(A-1) dated 13th December, 1963 indicating that the benefit of Section 84 is attached to the undertaking and not to the owner thereof and, consequently, the successor would be entitled to the benefit for the unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80-IB of the Act is available to the partnership firm and the conditions imposed under Section 80-IB(2)(i) does not come in the way.”

The said Circular has also been relied upon by the Hon’ble Punjab & Haryana High Court in the case of Mega Packages [2011] 203 Taxman 236 while considering the eligibility of deduction under section 80-IC on conversion of proprietorship concern into a partnership firm. The Hon’ble High Court observed as under: “9. Adverting to the alternate reason adopted by the Assessing Officer to deny the benefit of Section 80-IC the Act for the remaining period, suffice is to notice that the formation of the partnership from proprietorship business could not be held to be as a result of splitting or reconstruction of a business already in existence which could justify denying benefit by virtue of Section 80-IC(4)(i) of the Act. The Tribunal rejected the said contention as under:- 12. The said circular was issued with reference to Section 84 which was replaced by section 80J w.e.f. 1.4.1968. The said section 80J has been omitted by Finance Act No.2 of 1996 w.e.f. 1.4.1989. However, the provisions of section 84/80J and 80IC are similar in the context of benefit of deduction to be allowed to an undertaking. Reading the provisions of section 84, 80J and 80IC of the Income Tax Act, we find that the provisions of the aforesaid sections are similar and applying the circular issued in respect of section 84 to the provisions of section 80IC, we hold that the benefit of deduction u/s 80IC, which has not withdrawn till date, as a going concern, is to be allowed to an undertaking. The said undertaking being succeeded by a partnership firm, would not disentitle the succeeding person, the benefit of deduction under the aforesaid section. We find support from the ratio laid down in the under mentioned judgment replied upon by the assessee." 10. The interpretation placed by the Tribunal on the provisions of Section 80- IC(4)(i) of the Act being in consonance with law, no fault arises in the view taken by the Tribunal. No ground to interfere with the order of the Tribunal has been made out. Therefore, no substantial question of law arises in this appeal. Accordingly, the present appeal is dismissed.”

The issue relating to availability of deduction under section 80J for the unexpired period in case of amalgamation has also been examined by

The crux of all the above decisions fortify that prior to insertion of sub- section (12) in section 80IA / 80IAB of the IT Act, the deduction was allowed to the successor entity to which the undertaking was transferred. We are, therefore, not persuaded to accept the contention of the Revenue that sub-section (12) of section 80IA was an enabling provisions which entitled the successor entity to claim the benefit relating to undertaking transferred in the scheme of amalgamation /demerger. The deduction was available to the successor even prior to insertion of sub-section (12) and pursuant to the provisions of sub- section (1) r.w.s. sub-section (4) of section 80IA of the IT Act.

We are rather inclined to accept the proposition put forth by the Ld AR of the assessee that sub-section (12) was in the nature of disabling

Sub-section (12) of section 80IA provided that: i. In case of the amalgamating company or the demerged company the deduction would not be admissible, in the year of amalgamation or demerger; and ii. The provisions of the section, as far as may be, should be applied to the amalgamated company or the resulting company, as would have applied to the amalgamating company or demerged company.

Thus, sub-section (12) restricted the rights of the amalgamating/demerged company to claim deduction under section 80- IA for the year in which the amalgamation/demerger takes places, even if such amalgamation/demerger was effected in the middle of the year, and the profits of such undertaking for the period up to the appointed date/demerger are taxed in the hands of the amalgamating company/demerged company.

The Coordinate Bench of this Tribunal (Ahmedabad Bench) in ITO vs. SLM Maneklal Industries Ltd. [1986] 17 ITD 515, in the context of section 80J of the Act has held that in case of amalgamation effective during the year, the amalgamating company will be eligible to claim deduction upto the period the undertaking was operated by it and, the amalgamated company will be eligible to claim deduction for the period the undertaking was operated by it after the amalgamation. In this case,

In summary, prior to insertion of sub-section (12) in section 80IA, the deduction was allowed to the amalgamating and the amalgamated companies on a pro-rata basis for the year in which the amalgamation took place. Sub-section (12), although allowed the benefit to the successor entity to which the undertaking was transferred, it changed the position a little, by disentitling the amalgamating company to claim any deduction in the year of amalgamation. Therefore, sub-section (12) did not create a new right, since this right was already provided in the statute to the successor. It, in effect, curtailed the rights of the amalgamating company or demerged company by disenabling them to claim any benefit in the year of amalgamation/demerger.

We also tend to agree with another proposition put forth by the AR of the assessee that sub-section (12) to section 80IA only made explicit that was implicit in the provisions and therefore withdrawal of sub- section (12) by sub-section (12) cannot withdraw what was implicit in the statue.

It is a settled principle that when law makes something explicit, which is implicit in the provisions, the amendment or deletion of the explicit provision does not take away what is implicitly provided. The Hon’ble Delhi High Courtin case of CIT vs. Jindal Exports Ltd. (314 ITR 137) which is approved by the Hon’ble Supreme Court in CIT vs. Tulsyan NEC Ltd. (330 ITR 226) held that the amendment to explanation

We may also refer to one more amendment made by the Finance Act, 1999 (by which sub-section (12) was introduced in section 80IA of the IT Act), for the purposes of "tax neutral" business reorganisation i.e. 35AB(3). This amendment relate to an expenditure which was incurred in a particular year and the allowance was spread over a certain number of years. Section 35AB provided that where an assessee paid any lump sum consideration for acquiring any know-how, the allowance thereof would be spread over six years beginning from the year of payment. Sub-section (3) was inserted by Finance Act 1999 which read as follows:

The Notes on clauses (to the Finance Bill, 1999) explains the amendment as follows: "Clause 17 seeks to amend section 35 AB of the Income tax Act relating to allowance of expenditure on know-how. Under the existing provisions, any lump sum consideration paid for acquiring know-how is allowed in six years commencing from the previous year in which the expenditure incurred, at the rate of one sixth of the amount.

It may be noted that sub-section (3) "entitles" the amalgamated or the resulting company to claim the deduction. As against that, sub-section (12) did not use the same language. Rather, sub-section (12) provided the manner in which the deduction shall be claimed in the year of amalgamation or demerger and in fact as observed earlier it disabled the existing entity from claiming the deduction in the year of amalgamation/demerger. Thus, sub-section 12 could at best be said to make explicit what was implicit.

In the backdrop of above discussion let us now examine the provisions of sub-section (12A) and its applicability to the present case. Sub- section (12A) was inserted by the Finance Act, 2007 w.e.f. 01.04.2008. It reads as follows: "(12A) Nothing containing sub-section (12) shall apply to an enterprise or undertaking which is transferred in the scheme of amalgamation or demerger on or after the 1st day of April, 2007".

Notes on clauses to the Finance Act, 2007 explains it as follows:

The language used in sub-section (12A) simply states that provisions of sub-section (12) shall not apply to undertakings or enterprise transferred in the scheme of amalgamation or demerger after 31.03.2007. Even the notes on clause reiterated the same text. The Explanatory memorandum too has not clarified anything more than what is mentioned in the sub-section (12A) except that the heading under which the said explanation is appearing, stated that the deduction shall not be available after 31-3-2007.

As has been held above, sub-section (12) did not confer any new rights to the successor entity when the undertakings were transferred from one taxpayer to another. Sub-section (12A) simply states that in a case of amalgamation or demerger after 31.3.2007, the provisions of sub- section (12) would not be applicable. If the intention of legislature was to curtail the rights of the new owner of the undertaking to claim the tax holiday for residual period, it could have simply stated that benefit u/s 80IA will not be available or it could have stated that the deduction prescribed under sub-section (1) of section 80IA will not be available to the successor. Instead it has used the language to depict that post 31.3.2007, in case of amalgamation/demerger, the provisions of sub- section (12) will have no application. We are of the view that by doing so, the legislature has restored the position that prevailed prior to insertion of sub-section (12) in section 80IA. As discussed above, various Courts have confirmed the availability of benefit of tax holiday claims (although under different sections) and allowed to the successor even prior of specific provisions of sub-section (12) in section 80IA of the IT Act.

Wherever the legislature intended denial of any deduction, it expressly so provided. To illustrate, section 10A(9) (since omitted) which sought to deny the deduction under section 10A, where there was a change in shareholding, it was expressly so provided and a reference was drawn to the sub-section conferring the deduction. Sub-section (9) of section 10A of the IT Act read as under:

Thus, a conscious use of different terminology or language is found to be adopted for every amendment and that difference cannot be ignored, for the purposes of interpretation.

Looking from another angle, since the provisions of sub-section (12) were disabling in nature, as it disentitled an amalgamating company or a demerged company from claiming deduction in the year of amalgamation or demerger, the insertion of sub-section (12A) merely negated the effect of sub-section (12) and cured the disability created under sub-section (12) of section 80IA of the IT Act. Further, it is also worth noting that the language used in sub-section (12) had another defect. It can be explained with the help of an example: Suppose an entity had 3 eligible undertaking on which tax holiday was claimed and one out of the three was demerged to another entity. By virtue of clause (a) of sub-section (12) which specifies that no deduction shall be admissible under this section to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes places, even the other two undertakings which remains with the demerged company could be denied the benefit of tax holiday when only one undertaking is determined. We are, therefore, of the view that the legislature, in all its wisdom, has neutralised the disability enshrined in sub-section (12) by inserting sub-section (12A) in section 80IA of the IT Act.

We now refer to the contention of the DR where he has relied on the contents of the Circular No. 3 of 2008 dated 12 March 2008 issued by CBDTto explain the provisions of newly inserted section 80IA(12A). The circular provided as under: “35. Tax benefit u/s 80IA not available to undertaking / enterprise of Indian companies undergoing amalgamation or demerger after 31.03.2007 35.1 Sub-section (12) of section 80-IA provides that where any undertaking of an Indian company which is entitled to the deduction under the said section is transferred before the expiry of the period specified therein, to another Indian company in a scheme of amalgamation or demerger, the provisions of the said section 80-IA shall apply to the amalgamated or the resulting company as they would have applied to the amalgamating or the demerged company if the amalgamation or demerger had not taken place. The main intention in providing benefit u/s 80-IA had been to provide incentive to those who had taken initial investment and entrepreneur risk. Hence, it was felt that there was no justification for passing on the benefit to someone who had not taken these risks and had only acquired the eligible undertaking much later when the risks had reduced. Hence, a new sub-section (12A) has been inserted in section 80-IA so as to provide that the provisions of sub-section (12) shall not apply to any undertaking or enterprise which is transferred in a scheme of amalgamation or demerger after 31.03.2007. Thus, if an undertaking or an enterprise is transferred in a scheme of amalgamation or demerger after 31.03.2007, the benefits of deduction u/s 80-IA will not be available to the amalgamated or demerged undertaking or enterprise. The content of this circular will supersede whatever contrary has been stated, on this issue, in any other circular, issued by the Central Board of Direct Taxes earlier. (Emphasis supplied) 35.2 Applicability – this amendment will take effect from 01.04.2008 and will accordingly apply in relation to the assessment year 2008-09 and subsequent years.”

TheLd DR contended that the intention of providing benefit under section 80-IA was to accord incentive to those who had made initial investment and taken entrepreneurial risk. He accordingly submitted that the amendment was brought in by introducing sub-section (12A) to disallow such benefit in the hands of someone who has not taken these

The CBDT in this circular has tried to clarify something which is nowhere stated either in the language of newly inserted sub-section (12A) or in the Notes to Clause or explanatory memorandum to Finance Bill 2007. Sub-section (12A) simply prescribes that from a particular date the provisions of sub-section (12) shall not apply to the undertaking which are transferred under a scheme of amalgamation or demerger. Further, as we have already held, sub-section (12) of section 80IA did not confer any new rights to the tax payer and hence its non-applicability cannot be construed to mean withdrawal of a right which is conferred under separate provisions of Section 80IA i.e. sub-section (1) r.w.s. (4) of section 80IA of the IT Act.

If the intention of tax holiday under section 80IA was to provide incentive to only original investor, the legislature would have never inserted sub-section (12) in the statute. At least, the memorandum explaining the provisions of Finance Bill 2007, regarding insertion of sub- section (12) in Section 80IA should have clarified why the legislature thought fit to deviate from the its basic intent of providing incentive to the original investor and provide benefit to the successor. We have seen earlier, the memorandum explaining the provisions of Finance Bill 2007 has no such reference. It is, therefore, difficult to accept the contention of the Revenue and accept the contents of Circular no. 3 of 2008 to be depicting correct intention.

In our view, therefore, the clarification provided in the circular for insertion of sub-section (12A) cannot be extended beyond what is unambiguously stated in the provisions of the IT Act. Sub-section (12A) simply states that from a particular date i.e. 31 March 2007 the provisions of sub-section (12) shall not apply in the specified situations. There cannot be any other meaning to such simple provision of the IT Act.

We are not inclined to take cognisance of the contents of this Circular since the language of sub-section (12A) is plain and unambiguous. The Hon’ble Supreme Court in case of Ratan Melting & Wire Industries (Civil Appeal No. 4022 of 1999) has held as under: “6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed in a decision of this Court or the High Court. So far as the clarifications/ circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at from another angle, a circular which is contrary to the statutory provisions has really no existence in law.”

We also place reliance on the decision of the Allahabad High Court in a case Shivangee Crafts Limited vs. State of UP. A writ petition was filed by assessee in reference to UP Trade Tax Act, 1948, wherein the Court has held that till such time as a clarification or amendment by the Legislature or by Ordinance is not incorporated in the statute, no notification or circular of the Department can override the statutory

Even if one has to assume that the real intent of insertion of sub-section 12(A) was to accord incentive to those who had made initial investment and taken entrepreneurial risk, then also deduction under section 80IA cannot be denied to the successor taxpayer entities since successor entities would pay due and fair consideration for the value of the undertakings taken over, which includes the price for assumption of full risk of investment and operations. In other words, the entrepreneurial risk of the undertaking would also travel with the undertaking and the new owner of the undertaking would also bear the same risk as the original investor. The original investor will recover the price from the new investor in respect of the higher risk which he would have assumed at the initial stage.

Further, even if this intention is considered as relevant, such claim cannot be denied in case of amalgamation and demerger since:

While we reject the contention of the Revenue that intention of the legislature in introducing sub-section (12A) was to deny the benefit to the successor in the scheme of amalgamation or demerger, it is also worth noting that in the present case, the initial investment in eligible undertakings /enterprises was made by Grasim (the holding company of the assessee). These undertakings were demerged by Grasim to its wholly owned subsidiary, viz. SCL. Subsequently, SCL was amalgamated with the assessee w.e.f. 1 July 2010. Accordingly, even after the amalgamation of SCL with the assessee, there is no change in the entity which made the initial investment since Grasim still retains the entrepreneurial risk with itself as the ultimate shareholder of the assessee company. Therefore, even assuming that the CBDT Circular is to be relied upon, the conditions prescribed by the CBDT for denial of deduction is not fulfilled in the present case. Accordingly, even on this

We are also inclined to draw reference to one more argument of the AR of the assessee. The scheme of amalgamation of SCL with the assessee was duly approved by the Hon’ble High Courts of Bombay and Gujarat. The Hon’ble Courts in its order has explicitly conferred upon the assessee, being the amalgamated company, a right to claim deduction under section 80-IA in respect of the eligible undertakings for the residual period. The relevant extract of the scheme is reproduced below for reference: “… all the rights and benefits that have accrued or which may accrue to the Transferor Company, whether on, before or after the Appointed Date, including income-tax benefits and exemptions including the right to deduction under Section 80-IA of the Income-tax Act, 1961 (or any statutory modification or re-enactment thereof for the time being in force), shall, under the provisions of section 391 to 394 of Act and all other applicable provisions, if any, without any further act, instrument or deed, cost or charge be and stand transferred to and vest in and/ or deemed to be transferred to and vested in and be available to the Transferee Company so as to become licenses, permits, entitlements, quotas, approvals, permissions, registrations, incentives, sales tax deferrals, exemptions and benefits, subsidies, concessions, grants, rights, claims, leases, mining leases, prospecting licenses, tenancy rights, liberties, special status and other benefits or privileges of the Transferee Company and shall remain valid, effective and enforceable on the same terms and conditions.”

We would be sitting on the judgment and wisdom of the Hon’ble Courts if we were to deny the benefit especially sanctioned by the Hon’ble High Courts.

The Kolkata Bench of the Tribunal in case of Electrocast Sales India Ltd. vs. DCIT [2018] 170 ITD 507, has held that merger scheme

In view of the above discussion, we hold that sub-section (12A) of section 80IA of the IT Act, merely neutralises applicability of sub-section (12) and does not disentitle the successor entities to claim deduction in accordance with section 80IA of the IT Act. Accordingly, AO is directed to allow the deduction as claimed by the assessee with respect to eligible units acquired from SCL. Accordingly, Ground no.1 of the assessee is allowed.

Ground no.2 of the assessee relate to disallowance of additional depreciation under section 32(1)(iia) of the IT Act in respect to assets installed during the FY 2009-10 (i.e. AY 2010-11) and are used for a period less than 180 days in that year (spill over depreciation).

The Ld CIT(A) upheld the action of the AO and has held as under: “It can be seen that there is no explicit provision like section 32(2) to deal with depreciation that cannot be claimed due to statutory restriction. The restriction to 10 % (one half of 20 %) arose as a result of not using the asset on which additional depreciation is claimed more than 180 days. What has not been claimed gets absorbed to closing WDV and for next year depreciation is claimed on the opening WDV. There is no provision in law to cull out a specific portion

The assessee, in its original return filed u/s 139(1), claimed an amount of Rs.24,12,51,789/- towards additional depreciation u/s. 32(1)(iia) of the IT Act. The above depreciation was in respect of assets installed in FY 2009-10 (relevant to AY 2010-11) but used for less than 180 days during that year.

The learned AR of the assessee submitted that the additional depreciation allowable u/s 32(1)(iia) is an incentive in the nature of accelerated deduction, which has been earned in the year of acquisition though restricted for that year to 50% on account of its usage for less than 180 days. The balance incentive so earned must, therefore, be made available to the assessee in the subsequent year. The overall deduction of depreciation u/s 32 shall definitely not exceed the total cost of plant and machinery. Therefore, there is no excess allowance of depreciation / additional depreciation. The DR on the other hand sought support from the order of the lower authorities.

Prior to such amendment, there have been various Courts decisions wherein it has been held that beneficial legislation should be given liberal interpretation so as to benefit the assessee. The Hon’ble Courts have held that the accelerated depreciation as per clause (iia) to Section 32(1) is a benefit granted to the assessee, the law cannot be read in a manner to make such benefit void merely because it is not explicitly provided.

The Division Bench of the Madras High Court in case of CIT vs T. P. Textiles Pvt. Ltd. [394 ITR 483], took note of the amendment vide third proviso to clause (ii) of sub-section 1 of Section 32 of the Act and observed as under: “10.1:­ The plain language of section 32(1)(iia) read along with relevant proviso would have us come to the conclusion that, there is no limitation in the assessee claiming the balance 10 per cent of additional depreciation in the succeeding assessment year. 10.2:- As a matter of fact, with effect from April 1, 2016, the ambiguity, if any, in this regard, in the mind of the Assessing Officer, stands removed by virtue of the Legislature, incorporating in the Statute, the necessary clarificatory amendment.

We also find that the Coordinate Bench of this Tribunal in the case of Grasim Bhiwani Textiles Limited vs ACIT (ITA 790 & 791/Mum/2014), has also allowed the claim of spill over depreciation observing as under: “6. The issue under consideration is also squarely covered by the order of coordinated bench in the case SIL Investment Ltd., 73 DTR 0233, wherein it was held that additional depreciation, which was restricted in the year of purchase to the extent of 50% on the plea of machinery having been put to use for a period of less than 180 days, the balance of additional depreciation is required to be allowed in the succeeding year. In view of the above, we do not find any merit for disallowing assessee’s claim for depreciation.”

Considering above views of different High Courts and Tribunal and respectfully following decision of the Hon’ble jurisdictional High court in the case of Pr.CIT vs. Godrej Industries Ltd. (supra) on this issue,

Ground no.3 of the appeal relate to denial of claim by the AO under section 35(2AB) in respect of R&D expenses incurred by the assessee amounting to Rs. 7,50,139/-, on the basis of report received from Department of Scientific and Industrial Research (DSIR).

The assessee has in-house Research and Development facilities at three locations, Khor (MP), Kharia Khangar (Rajashthan) and Taloja (Maharashtra) which are approved by the DSIR and entitled to deduction u/s 35(2AB) of the IT Act. During the year the assessee claimed revenue expenditure amounting to Rs.2,02,93,591/- under section 35(2AB) of the IT Act. The AO disallowed the claim to the extent of Rs.7,50,139 on the ground that DSIR has not approved the said expenditure in a report submitted by it to the tax officer in Form 3CL. The LD CIT(A) confirmed the above disallowance.

The AR of the assessee submitted that as per section 35(2AB) of the IT Act, the DSIR is only empowered to approve the R&D facility. For the year under consideration there was no provision mandating the DSIR to approve the expenditure. It was further submitted that once the R & D facility is approved by the prescribed authority, i.e. DSIR by issuing Form No.3CM, the expenses incurred by the assessee have to be allowed u/s 35(2AB) of the IT Act. It was also submitted that Rule 6(7A) of the Income Tax Rules, 1962 was amended much later to provide that DSIR

The DR, on the other hand, apart from relying on the order of the lower authorities, submitted that the amendment to Rule 6(7A) of the IT Rules by Finance Act, 2016 with effect from 01.07.2016 is only procedural and the same is applicable to the relevant assessment year.

We have heard the rival contentions and perused the material on record. To understand the controversy, it’s important to examine the requirements of Section 35(2AB)(1) which reads as under : "(2AB)(1) Where a company engaged in the business of bio-technology or in any business of manufacture or production of any article or thing, not being an article or thing specified in the list of the Eleventh Schedule incurs any expenditure on scientific research (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and two times of the expenditure so incurred."

It is clear from the provisions of section 35(2AB) that once R&D facility is approved by the DSIR, the expenses incurred by the assessee have to be allowed. If the law wanted the expenditure to be approved by the prescribed authority, same would have been expressly provided in the section.

The Bangalore Tribunal in case of Natural Remedies Pvt. Ltd. vs. ACIT (2021) 61 CCH 0005 has held that for the period prior to the Income Tax (Tenth Amendment) Rules, 2016, with effect from 01.07.2016, which amended Rule 6(7A) of the IT Rules, deduction u/s

As can be noted above, the Tribunal relied on another decision of the same Bench in the case of M/s Mahindra Electric Mobility Ltd. vs ACIT [ITA No.641/Bang/2017 - order dated 14.09.2018] wherein it was observed as under: "20. From the above discussion it is clear that prior to 1.7.2016 Form 3CL had no legal sanctity and it is only w.e.f 1.7.2016 with the amendment to Rule 6(7A)(b) of the Rules, that the quantification of the weighted deduction u/s.35(2AB) of the Act has significance. In the present case there is no difficulty about the quantum of deduction u/s.35(2AB) of the Act, because the AO allowed 100% of the expenditure as deduction u/s.35(2AB)(1)(i) of the Act, as expenditure on scientific research. Deduction u/s.35(1)(i) and Sec.35(2AB) of the Act are similar except that the deduction u/s.35(2AB) is allowed as weighted deduction at 200% of the expenditure while deduction u/s.35(1)(i) is allowed

Similar view has been taken by various other Tribunals in the following cases:

The AO in the present case has not disputed the correctness of the claim made by the assessee. In view of the above discussions and judicial precedents on this issue, we hold that the claim of the assessee must be granted as made in its return of income. It cannot be restricted to the extent of claim as approved in Form No.3CL by DSIR since there

Ground no.4 filed by the assessee is with respect to short grant of TDS / TCS credit claimed by the assessee on the basis of certificates available with the assessee.

The learned AR of the assessee submitted that it claimed credit towards TDS / TCS on the basis of entries appearing in Form 26AS and also on the basis of original TDS certificates available with them. The claim of credit was, however, restricted by the AO only to the extent of entries appearing in Form 26AS. The AR of the assessee also submitted that it produced copies of the TDS / TCS certificates before the AO on sample basis and was willing to furnish all the TDS / TCS certificates with respect to its claim made in the ROI.

It was further submitted that some of the TDS/ TCS certificate are issued in the name of amalgamating company (i.e. SCL/ Grasim Industries). Due to the amalgamation during the year under consideration, some of these TDS/ TCS certificates were issued by the parties in the name of the erstwhile entity.

It was confirmed that neither Grasim Industries nor SCL has claimed any credit of such TDS or TCS in its return of income for any year. The AR

Our attention was invited to the decision of coordinate Bench of Ahmedabad Tribunal in case of Adani Gas Ltd. vs. ACIT (ITA No. 2241/Ahd/2011) wherein it has been observed as under: “13. … We conclude accordingly that once the demerged gas distribution undertaking no more exists w.e.f. 01-01-2007 coming to be the appointed day, the assessee-resulting company is entitled for all the pro rata adjustments of TDS, advance tax and MAT credits as per law; to be utilized in former’s account. The net result of our above discussion is that assessee’s arguments in principle are accepted in view of clauses of the above stated demerger scheme, sections 391 to 394 of the Companies Act, Section 2(19AA) of the Income Tax Act and the case law discussed hereinabove. We direct the Assessing Officer to compute pro rata quantification of the demerged undertaking MAT, TDS and advance tax credits as per law after affording adequate opportunity of hearing.”.

We have heard the rival submissions. The controversy relates to denial of credit of TDS / TCS since the entries are not appearing in Form 26AS. We refer to the decision of Delhi High Court in a PIL moved by the Hon’ble Court on its Own motion vs Commissioner of Income Tax [2013(352) ITR 273]. The Hon’ble Court issued a mandamus directing the CBDT to issue directions to give credit of unmatched and mismatched TDS certificates. Pursuant to the said decision of the Delhi High Court, the CBDT has issued instruction No.5 of 2013, dated 8.7.2013 directing that where the assessee approaches the assessing officer with requisite details and particulars in the form of TDS certificate

We also refer to the decision of Allahabad High Court in Civil Misc Writ Petition (Tax) No.657 of 2013 Rakesh Kumar Gupta Vs. Union of India and another, wherein the High Court has held that assessee cannot be denied credit for TDS on the ground of Form 26AS mismatch, since the mismatching is not attributable to the assessee and the fault solely lay with the deductor.

We also refer to the decision of Coordinate Bench of this Tribunal in the case of LSG Sky Chef (India) (P.) Ltd. [2014] 45 taxmann.com 256, wherein the taxpayer assessee had claimed credit in respect of TDS on the basis of TDS certificates available with it which were submitted to the AO. However, the AO denied credit of TDS to the extent of entries not appearing in Form 26AS. In this regard, the Hon’ble Tribunal held as under: “4.3 … In our view, though Form 26AS (r/w r.31AB and ss. 203AA and 206C (5)) represents a part of a wholesome procedure designed by the Revenue for accounting of TDS (and TCS), the burden of proving as to why the said Form (Statement) does not reflect the details of the entire tax deducted at source for and on behalf of a deductee cannot be placed on an assessee-deductee. The assessee, by furnishing the TDS certificate/s bearing the full details of the tax deducted at source, credit for which is being claimed, has in our view discharged the primary onus on it toward claiming credit in its respect. He, accordingly, cannot be burdened any further in the matter. The Revenue is fully entitled to conduct proper verification in the matter and satisfy itself with regard to the veracity of the assessee's claim/s, but cannot deny the assessee credit in respect of TDS without specifying any infirmity in its claim/s. Form 26AS is a statement generated at the end of the Revenue,

Accordingly, we direct the AO to grant credit of TDS / TCS credit for certificates produced by the assessee including the certificates which may be in name of Grasim / SCL. The AO can satisfy himself to the effect that the claim in respect of the said certificates are not made by the Grasim / SCL in their ROI. This ground is remitted back to Ld AO and accordingly it is allowed for statistical purpose.

Ground no. 5 is general in nature and does not require separate adjudication and hence accordingly dismissed.

With respect to admissibility of additional ground the AR relied on the judgment of the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383 to contend that since the grounds are purely legal in nature it should be admitted for adjudication.

The Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. (supra) observed as under: “5. Under Section 254 of the Income-tax Act, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, we do not see any reason why the assessee should be prevented from raising that question before the tribunal for the first time, so long as the relevant facts are on record in respect of that item. We do not see any reason to restrict the power of the Tribunal under Section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to file an appeal/cross-objections before the Tribunal. We fail to see why the Tribunal should be prevented from considering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. C.I.T. this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining

At the outset, we may point out that the DR did not raise any objection towards admissibility of the additional grounds. We are of the view that a legal plea can be raised by the affected party at any point of time in the matter pending for adjudication. Further, it is settled proposition of law that mere procedural lapse, or omission on the part of the assessee, cannot lead to denial of substantive benefit/eligible claim in the hands of the assessee. Keeping in view, of above discussion and decision of the Hon’ble Apex Court, the additional grounds filed by the assessee are accepted and taken up for adjudication.

We find that this issue is squarely covered by the decision of the Hon’ble Rajasthan High Court in the case of Chambal Fertilizers and Chemicals Ltd. vs. JCIT in Income Tax Appeal No.52 & 68 of 2018 dated 31/07/2018. The Hon’ble Rajasthan High Court had taken into account the CBDT Circular dated 18/05/1967 and held that the education cess, secondary and higher education cess should be allowed as deduction. Their Lordships had held that Section 40a(ii) of the Act applies only to taxes other than cess. This issue is also decided in favour of assessee by Jurisdictional High Court in case of Sesa Goa Limited vs. JCIT (Tax Appeal No. 17 of 2013) order dated 28 Feb 2020, which has been followed in various Tribunal orders subsequently.

Respectfully following the above decisions, the ground raised by the assessee is allowed. We direct the AO to allow deduction towards education cess and secondary and higher education cess to the extent of actual payment made by the assessee. These grounds are accordingly allowed.

Ground no. 8 is the additional ground filed by the assessee with regard to refund of dividend distribution tax paid in excess of the rate prescribed under DTAA on dividend paid to non-resident shareholders.

We are in agreement with the findings of the coordinate Bench of this Tribunal. We restore the issue to the AO for examining assessee’s claim of applicability of beneficial rate of tax as per the applicable DTAA to the DDT paid under section 115O of the IT Act. If the amount quantified as DDT liability based on the tax treaty rate is lower than the actual DDT paid by the assessee, then the same should be refunded back to the assessee. Accordingly, this ground of appeal is allowed for statistical purposes.

Ground no. 9 is the additional ground of the appeal wherein the assessee has contended that the order passed by the Transfer Pricing Officer is not valid. Accordingly, the addition made in the assessment pursuant to such order is also invalid. Ground nos. 8 to 12 of the

The relevant facts are, an addition was made in the assessment towards corporate guarantee commission in respect of corporate guarantee extended by the assessee to the bankers of its subsidiaries in middle east. During AY 2011-12, the assessee had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL). For the purpose of overseas acquisitions, the assessee had given corporate guarantee to the bankers of its Associated Enterprises (AEs) for providing loan to the AE for the purpose of capital commitments and working capital facility availed by them.

Guarantee for an amount of USD 156 Millions was given in respect of foreign currency loans taken by UCMEIL, for the purpose of overseas acquisitions. Further, corporate guarantee for an amount of USD 215 Millions was given on behalf of Star Cement, for the purpose of capital commitments and working capital facility availed by them.

The TPO computed an amount of Rs.23,65,27,390/- being commission chargeable on the Corporate Guarantees provided by the assessee to the bankers for providing loan to the AEs of the assessee and

The AR of the assessee submitted that transfer pricing order passed for the subject year is bad in law on the following grounds:

Before we get into merits of plea raised by the assessee, it will be worthwhile to first list the chronology of event and various dates related to transfer pricing proceedings for the year: Sr. Date Event No. 1 25.11.2011 Original Return of Income filed under Section 139(1) of the Act 2 12.03.2013 Revised Return of Income filed under Section 139(5) of the Act 3 05.07.2013 Reference made to learned Transfer Pricing Officer (‘TPO’) under Section 92CA(1) of the Act, during original assessment proceedings 4 26.11.2014 Notice issued by the learned AO under Section 153C read with Section 153A of the Act 5 28.11.2014 Transfer pricing order passed under Section 92CA(3) of the Act, pursuant to the reference made during regular assessment proceedings

It is observed that the AO issued notice dated 26 November 2014 initiating a fresh proceeding u/s.153C read with section 153A of the IT Act. The 1st proviso to section 153C provides that for the purpose of abatement of assessment and reassessment the date on which the AO receives the books of accounts or documents shall be considered. Consequently, the date on which notice u/s.153A of the IT Act was issued, the assessment proceeding initiated u/s.143(2) of the IT Act prior to such notice based on the original return filed and the transfer pricing proceeding initiated by reference dated 5 July 2013 got abated and ceased to exist. The Bombay High Court in the case of JSW Steel Limited ([2020] 115 taxmann.com 165 has held that once proceeding is initiated under section 153A of the Act, the original return of income and the assessment pending on that date loses its validity and, a fresh return of income is required to be filed which the AO is obliged to assess afresh. The relevant extract of the judgement is reproduced below: “12... Further sub section(a) of section 153A(1) provides for issuance of notice to the persons searched under section 132 of the Act to furnish a return of income. However, the second proviso to section 153A of the said act makes it clear that assessment relating to any assessment year filed within a period of the six assessment years pending on the date of search under section 132 of the Act shall abate. Thus if on the date of initiation of search under section 132, any assessment proceeding relating to any assessment year falling within the period of the said six assessment years is pending, the same shall stand abated and the Assessing Authority cannot proceed with such pending assessment after initiation of search under section 132 of the said Act.

Since, in the instant case, the original assessment proceedings ceased to exist, and fresh proceedings u/s. 153C r.w.s. 153A was initiated, the assessee was required to file a fresh return and the AO could have only proceeded against such fresh return. The TPO has passed the order u/s.92CA(3) of the Act based on the old reference made to it dated 5 July 2013. No fresh reference was made by the AO after issuance of notice dated 26 November 2014 under section 153C of the Act. In fact, the Transfer Pricing officer passed the order even prior to the filing of return against the 153C proceedings. The Hon’ble Supreme Court in the case of Laxman Das Khandelwal ([2019] 108 taxmann.com 183 [SC]) held that even in the proceedings initiated u/s.153A of the IT Act, the AO is duty bound to issue notice u/s.143(2) of the IT Act and in the absence of such notice the assessment proceedings are invalid.

Further, in the present case the notice under section 143(2) of the IT Act pursuant to fresh proceedings under section 153C was issued on 8 January 2015. The order of the TPO has been passed on 28.11.2014 i.e. before the assessment proceedings initiated by issue of notice u/s.143(2). The Pune Bench of the Tribunal in the case of Maximize Learning Private Limited (ITA No. 2234/PN/2012 dated 2 February 2015) has observed that the law is quite clear i.e. TPO gets the jurisdiction to pass an order under section 92CA(3) of the Act only after the return is selected for scrutiny under section 143(2) and reference is made under section 92CA(1) of the Act after the issuance of notice under section 143(2) of the Act. Since in the instant case, the TPO had passed the order even before issuance of notice under section 143(2) of the Act, the order passed under section 92CA(3) of the Act is without jurisdiction.

In view of the above, we hold that the transfer pricing order passed by the TPO for the subject year is without jurisdiction and hence invalid. The addition made consequent to TPO order therefore does not hold any ground. Accordingly, this ground of the assessee is allowed. Consequently, Ground nos.8 to 12 in the appeal filed by the revenue

Ground no. 1 of the appeal relate to disallowance of claim amounting to Rs.1,40,80,74,900/- for rail system and Rs.29,52,99,959/- for power generation in view of provisions of section 80IA(12A) of the IT Act. 150. This ground is similar to Ground no.1 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have discussed this issue at length, hereinabove, while disposing the assessee’s appeal for AY 2011- 12 and allowed the ground of the assessee. Since facts relating to this ground of appeal remain same for AY 2012-13 also, we allow ground no.1 of the assessee’s appeal and direct the AO to delete the disallowance.

Ground no. 2 of the appeal for AY 2012-13 relate to disallowance u/s.14A of the IT Act r.w. Rule 8D of the IT Rules amounting to Rs. 2,36,25,581. As per the assessee the disallowance needs to be restricted to Rs.81,58,878 towards other expenses as the balance disallowance was made inadvertently in the Return of Income.

From the perusal of the assessment order, it is observed that the assessee in its return of income had inadvertently disallowed entire amount of interest paid on its cash credit facility amounting to Rs.1,54,66,689 under the provisions of section 14A of the IT Act. This

The AO duly verified the cash flow statement submitted during the course of assessment proceeding and noted that assessee had sufficient fund of its own for making investment. Accordingly, the AO agreed with the assessee’s contention that no interest is required to be disallowed u/s 14A of the IT Act. As for the other expenses, the AO has disregarded the submission of the assessee. Applying Rule 8D(2)(iii) the AO reworked the computation of disallowance at Rs. 1,81,80,007. The AO has not given any specific findings or reasons for rejecting the assessee’s computation of other expenses offered for disallowances. Having computed the quantum of disallowance u/s.14A to Rs.1,81,80,007/-, the AO did not make any separate addition to the returned income since the assessee had suo moto disallowed an amount of Rs.2,36,25,581/- in its computation. This was despite the fact that AO agreed with the assessee’s contention that no disallowance is required with regard to interest.

The LD CIT(A) agreed with the contention of the assessee and restricted the disallowance to Rs.81,58,878/-. The LD CIT(A) followed the decision of Coordinate Bench of this Tribunal in assessee’s own case for the earlier years and allowed the appeal of the assessee.

We have dealt with the issue of disallowance of other expenses in Ground no. 5 of the Revenue’s appeal for AY 2011-12 in ITA No. 2871/Mum/2018. Relying on the order of the Coordinate Bench of this Tribunal in earlier years in the assessee’s own case as also the decision of Hon’ble jurisdictional High Court for AY 2008-09 (Revenue’s SLP against such order of the High Court is rejected by the Hon’ble Supreme Court), we hold that total disallowance for the purpose of section 14A should be restricted to Rs.81,58,878/- i.e. amount suo moto offered by the assessee.

Coming to the claim of Rs.1,54,66,703/- (i.e. Rs.2,36,25,581/- minus Rs.81,58,878/-) which has erroneously crept in the computation of total income, we are of the view that the same cannot be sustained merely because the assessee has made this disallowance suo moto in its return of income. This is especially so when the AO himself has accepted the assessee’s contention that no disallowance was required u/s.14A in respect of interest. The Courts have even held that the assessing officers are in fact required to help the tax payers in making legitimate claim if they have missed out on some such claims since they are required to obtain only legitimate tax from the tax payers. Accordingly, if an assessee has actually made mistake in its return of income and offered excess disallowance, which in the present case has been also accepted by the tax officer, he should have reduced such erroneous disallowance suo moto even without assessee pointing out the same. We accordingly direct the AO to reduce the taxable income by Rs.1,54,66,703/-.

Ground no.3 of the appeal relate to disallowance of additional depreciation u/s. 32(1)(iia) of the IT Act amounting to Rs.31,37,50,105/- in respect of assets put to use for less than 180 days in FY 2010-11.

This ground is similar to Ground no.2 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that appeal, discussed above, following the decision of Hon'ble Bombay High Court in Pr.CIT vs. Godrej Industries Ltd. (supra), we have already held that the additional spill over depreciation should be allowed to the assessee. Since the facts relating to this ground remains same as in AY 2011-12, we direct the AO to allow the deduction claimed by the assessee in this regard.

Ground no.4 of the appeal relate to denial of claim by the AO u/s. 35(2AB) in respect of R&D expenses amounting to Rs.38,87,646/- on the basis of report received from DSIR.

This ground is similar to Ground no.3 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that year, discussed above, we have already taken a view that the amended Rule 6(7) of the IT Rules was applicable from AY 2016-17. There was no requirement for the AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the AO has not found any defect in the expenses incurred by the assessee, the same should be allowed as deduction.

Ground no.5 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS.

This ground is similar to Ground no.4 of the assessee’s appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit for TDS/TCS on the basis of certificates available with the assessee (including certificates which are in name of Grasim/SCL) since mismatch with Form 26AS cannot be attributed to the taxpayer. Following our decision in AY 2011-12, we direct the AO to grant credit for TDS/TCS for which the assessee produces certificates including the certificates in the name of erstwhile entities. The AO can satisfy himself to the effect that the claim in respect of the same certificates are not made by the erstwhile entities. This ground is restored to the file of AO and allowed for statistical purpose.

Ground no.6 is general in nature and does not require separate adjudication and hence accordingly dismissed.

The assessee has filed additional grounds vide application dated 10 January 2020 (Ground nos.7 and 8) and 5 November 2020 (Ground nos.9 and 10). Similar grounds were filed as additional grounds for AY 2011-12 also in ITA No. 1413/Mum/2018.

Following the Supreme Court Ruling in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, we admitted and adjudicated the additional grounds filed for AY 2011-12 since those were

Additional Ground nos.7 and 8 relate to the claim of deduction towards education cess and secondary and higher education cess in computing the total taxable income.

These grounds are similar to Ground no.6 and 7 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal on this ground and directed the AO to allow the deduction towards education cess and secondary and higher education cess, to the extent of actual payment made by the assessee, in computing its taxable income. Following our decision in AY 2011-12, we direct the AO to allow the deduction of actual payment of education cess and secondary and higher education cess in computing the taxable income for this year as well.

Additional Ground no. 9 of the appeal relate to refund of DDT paid in excess of the rate prescribed under DTAA on dividend paid to the non- resident shareholders.

This ground is similar to Ground no. 8 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal in AY 2011-12 and have given direction to the AO to verify the assessee’s claim. In case the rate of tax as per tax treaty on dividend is lower and the rate of DDT paid by the assessee, the excess should be

Additional Ground nos. 10 of the appeal relate to the validity of transfer pricing order passed by the learned TPO. The assessee has questioned the validity of transfer pricing proceedings and the consequent order passed by the TPO raising a plea that the same should be treated as non-est.

This ground is similar to additional Ground no.9 filed by the assessee in ITA no.1413/Mum/2018 for AY 2011-12. Incidentally the Revenue has also raised Ground nos.5 to 10 in ITA no 2872/Mum/2018 for AY 2012-13 against the relief allowed by LD CIT(A) in respect of additions made with regard to commission on corporate guarantee. Against the said grounds of Revenue, the assessee has also filed cross objection and Ground nos.4 and 5 in CO No. 130/Mum/2019 relate to the same matter. The Grounds raised by the Revenue and the CO filed by the assessee on this issue are similar to Ground nos.8 to 12 of the Revenue’s appeal in ITA no 2871/Mum/2018 for AY 2011-12 and Ground no. 6 and 7 in CO No.129/Mum/2019 of the CO filed by the assessee for AY 2011-12.

We have disposed of the Revenue’s appeal and the assessee’s appeal including their cross objection on this issue for AY 2011-12, together. Since in this year also the issue raised in all the ground pertain to common matter, we are disposing them together.

We have allowed the additional ground no.9 of the assessee in AY 2011- 12 in ITA no.1413/Mum/2018 and held that the order passed by the TPO based on the reference made in the original assessment proceedings was non-est. The AO was required to make fresh reference subsequent to the proceedings initiated under the block assessment u/s. 153C r.w.s. 153A of the IT Act. Since he failed to do so, the order passed by the TPO was not valid and the additions made based on the invalid order passed by the TPO cannot survive.

Having allowed the ground of the assessee, the grounds filed by the Revenue on this issue (Ground nos.8 to 12) in ITA no. 2872/Mum/2018 as well as Ground nos. 4 and 5 of the cross objection filed by the assessee in CO 130/Mum/2019 becomes infructuous and does not require any separate adjudication.

Ground nos. 1 and 2 of the Revenue’s appeal relate to claim of the assessee in treating sales tax exemption benefits received amounting to

These grounds are similar to Ground nos.1 and 2 of the Revenue’s appeal in ITA No. 2871/Mum/2018 and assessee’s cross objection in CO no. CO 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assessee’s own case for earlier years. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this ground raised by the Revenue.

Ground nos. 3 and 4 of the Revenue’s appeal relate to availability of deduction under section 80IA of the IT Act with respect to the rail system developed, operated and maintained by the assessee, amounting to Rs.1,48,44,82,911/-. Ground no.2 of the assessee’s cross objection is connected with this claim.

These grounds are similar to Ground nos.3 and 4 of the Revenue’s appeal in ITA No. 2871/Mum/2018 and assessee’s cross objection in CO No. 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assessee’s own case for earlier years, particularly AY 2010-11. Since the facts relating to this ground remain same, following our decision in AY 2011- 12, we reject this ground raised by the Revenue.

Ground no. 1 of the appeal relate to disallowance of claim for rail system and for power generation in view of provisions of section 80IA(12A) of the IT Act.

This ground is similar to Ground no.1 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have discussed this issue at length, hereinabove, while disposing the assessee’s appeal for AY 2011- 12 and allowed the ground of the assessee. Since facts relating to this ground of appeal remain same for AY 2013-14 also, we allow ground no.1 of the assessee’s appeal and direct the AO to delete the disallowance.

Ground no. 2 of the appeal relate to disallowance of additional depreciation u/s. 32(1)(iia) of the IT Act in respect of assets put to use for less than 180 days in FY 2011-12.

This ground is similar to Ground no.2 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that appeal, discussed above, following the decision of Hon'ble Bombay High Court in Pr.CIT vs. Godrej Industries Ltd. (supra), we have already taken a stand that

Ground no. 3 of the appeal relate to denial of claim by the AO u/s. 35(2AB) in respect of R&D expenses on the basis of report received from DSIR.

This ground is similar to Ground no.3 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that year, discussed above, we have already taken a view that the amended Rule 6(7) of the IT Rules was applicable from AY 2016-17. There was no requirement for the AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the AO has not found any defect in the expenses incurred by the assessee, the same should be allowed as deduction.

Ground no. 4 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS.

This ground is similar to Ground no.4 of the assessee’s appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit for TDS/TCS on the basis of certificates available with the assessee (including certificates which are in name of Grasim/SCL) since mismatch with Form 26AS cannot be attributed to the taxpayer. Following our

Ground no.5 is generic in nature and does not require separate adjudication and hence accordingly dismissed.

The assessee has filed additional grounds vide applications dated 14 January 2020 (Ground nos.6 and 7) and 5 November 2020 (Ground no. 8). Similar grounds were filed as additional grounds for AY 2011-12 also in ITA no. 1413/Mum/2018.

Following the Supreme Court Ruling in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, we admitted and adjudicated the additional grounds filed for AY 2011-12 since those were merely legal plea which did not require any factual investigation. Accordingly, we admit the additional grounds for AY 2013-14 filed by the assessee and have taken up the same for adjudication.

Additional Ground no.6 and 7 relate to the claim of deduction towards education cess and secondary and higher education cess in computing the total taxable income.

These grounds are similar to Ground no.6 and 7 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal on this ground and directed the AO to allow the

Additional Ground no. 8 of the appeal relate to refund of DDT paid in excess of the rate prescribed under DTAA on dividend paid to the non- resident shareholders.

This ground is similar to Ground no. 8 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal in AY 2011-12 and have given direction to the AO to verify the assessee’s claim. In case the rate of tax as per tax treaty on dividend is lower and the rate of DDT paid by the assessee, the excess should be refunded to the assessee. Following our decision in AY 2011-12, we direct accordingly.

Ground nos. 3 and 4 of the Revenue’s appeal relate to availability of deduction under section 80IA of the IT Act with respect to the rail system developed, operated and maintained by the assessee. Ground no.2 of the assessee’s cross objection is connected with this claim.

These grounds are similar to Ground nos.3 and 4 of the Revenue’s appeal in ITA No. 2871/Mum/2018 and assessee’s cross objection in CO no. 129/Mum/2019 for AY 2011-12 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assessee’s own case for earlier years, particularly AY 2010- 11. Since the facts relating to this ground remains same, following our decision in AY 2011-12, we reject this ground raised by the Revenue.

Ground no. 5 of the appeal relate to relief allowed by the LD CIT(A) by deleting additions made by the AO under section 14A of the IT Act r.w. Rule 8D of the IT Rules amounting to Rs.51,42,831/-. Ground no.4 of the assessee’s cross objection is connected with this claim

Ground nos.6 to 11 of the appeal relate to addition made by the AO regarding Corporate Guarantee commission in pursuant to the order passed by the TPO.

Unlike AY 2011-12 and AY 2012-13, the order passed by the TPO is based on the reference made by the AO subsequent to the proceedings initiated u/s. 153C r.w.s. 153A of the IT Act. Accordingly, the TPO order passed is pursuant to the valid proceedings. We are, therefore, adjudicating the grounds raised by the Revenue on this issue on merits of the matter.

During financial year 2010-11 (AY 2011-12), the assessee had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL). For the purpose of overseas acquisition, the assessee Company had given corporate guarantee to the bankers of its Associated

The assessee had out of abundant caution offered an amount of Rs.5,79,80,032/-.in its return of income as corporate guarantee commission although nothing was recovered as corporate guarantee commission from its AE’s. A claim was made in the return by way of notes as well as during assessment proceeding that nothing should be taxed towards corporate guarantee commission and amount offered for addition should be deleted

The Ld AO added as notional income an amount of Rs.25,41,59,209/- being commission chargeable on the Corporate Guarantee provided by the assessee Company to the bankers for providing loan to the AEs of the assessee Company. The LD CIT(A), however, deleted the addition on the ground that the provision of guarantee cannot be considered to be an international transaction as it had no impact on the profits, income or assets of the assessee company. Reliance was placed on the decision of earlier years wherein LD CIT(A) had relied upon the decision of Coordinate Bench of this Tribunal in case of Videocon Industries Limited vs. ACIT ITA No. 6662/Mum/2012.

The AR of the assessee submitted that as part of the assessee Company’s expansion plan and foraying into business outside India, the assessee Company had acquired stakes in Star Cement LLC., Middle East, through its wholly owned subsidiary in Dubai, viz., UltraTech Cement Middle East Investment Limited (UCMEIL)

The assessee was of the view that no guarantee fees/ commission was chargeable from its Associated Enterprises (‘AEs’) in respect of aforesaid corporate guarantees, since it is in the nature of shareholder’s activity of the Assessee.

The Ld AR of the assessee also contended that the corporate guarantee transaction has no bearing on the profits, income, losses or assets of the assessee hence it will be outside the ambit of transfer pricing provisions as it is not an international transaction within the meaning of section 92B of the Act.

On the other hand, the Ld DR submitted that no third-party would provide guarantee without compensation and accordingly, an adjustment for the corporate guarantee provided by the assessee was warranted.

We have taken into consideration the contentions advanced by the Ld counsels for both the parties, perused the orders of the lower authorities and the material available on record, and also taken note of the judicial pronouncements pressed into service by them in order to drive home their respective contentions in context of the aforesaid issue in question. As far as the contention of the AR that provision of corporate guarantee is not an international transaction, we are not convinced with it. A reading of Explanation–1(c) of section 92B of the Act, makes it clear that the provision of any kind of guarantee will come within the ambit of international transaction under section 92B of the Act.

We see no reasons to take any other view of the matter than the view so taken by Hon’ble jurisdictional High Court and coordinate Benches and therefore we reject the determination of arm’s length price reduced to Nil by the Ld CIT(A) and direct the AO to adopt 0.5% as an arm’s length consideration for the corporate guarantee issued by the assessee in favour of its AEs.

The grounds raised by the Revenue and the CO filed by the assessee are disposed off accordingly.

Ground no. 1 of the appeal relate to disallowance of claim for rail system and for power generation in view of provisions of section 80IA(12A) of the IT Act. 218. This ground is similar to Ground no.1 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have discussed this issue at length, hereinabove, while disposing the assessee’s appeal for AY 2011- 12 and allowed the ground of the assessee. Since facts relating to this ground of appeal remains same for AY 2014-15 also, we allow ground

Ground no. 2 of the appeal relate to disallowance of additional depreciation u/s. 32(1)(iia) of the IT Act in respect of assets put to use for less than 180 days in FY 2012-13.

This ground is similar to Ground no.2 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that appeal, discussed above, following the decision of Hon'ble Bombay High Court in Pr.CIT vs. Godrej Industries Ltd. (supra), we have already held that the additional spill over depreciation should be allowed to the assessee. Since the facts relating to this ground remains same as in AY 2011-12, we direct the AO to allow the deduction claimed by the assessee in this regard

Ground no.3 of the appeal relate to denial of claim by the AO u/s. 35(2AB) in respect of R&D expenses amounting to Rs.39,52,000/- on the basis of report received from DSIR.

This ground is similar to Ground no.3 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. In that year, discussed above, we have already taken a view that the amended Rule 6(7) of the IT Rules were applicable from AY 2016-17. There was no requirement for the AO to obtain specific report from the DSIR approving the expenses for the year under consideration. Accordingly, since the Ld AO has not found

Ground No.4 of the appeal filed by the assessee relates to disallowance of claim of investment allowance under section 32AC of the Act.

During the year under consideration, the assessee Company claimed in its original return filed u/s 139(1) an investment allowance u/s. 32AC of the IT Act on account of investment in plant and machinery.

The Finance Act, 2013 introduced a new section 32AC in the IT Act with effect from 1 April, 2014, which provides that a company, engaged in the business of manufacture or production of any article or thing, acquires and installs new asset amounting to Rs.100 crores or more, after the 31st day of March, 2013 but before the 1st day of April, 2015, then such company is entitled to an investment allowance of 15 percent of the investment in such new assets. The intention of the legislature was to provide incentive to the taxpayers making substantial investments in plant or machinery and thereby boost the manufacturing sector in the economy.

The assessee claimed the amount of Rs.3,43,97,11,256/- as deduction u/s. 32AC which includes Rs.248,65,65,041/- towards cost of components of plant or machinery lying as CWIP as on 1.4.2013 but aggregated and installed as ‘plant’ or ‘machinery’ during the FY 2013- 14. Further an amount of Rs.8,32,42,289/- was claimed in respect of

The AO rejected the claim of the assessee on the following grounds: “i. The word “and” signifies that both acquisition and installation of assets should be after 31/03/2013 and not merely the installation ii. The assets which are eligible for 100% depreciation even though put to use for less than 180 days are not eligible for investment allowance in view of provisions of section 32AC(4)(v).”

On further appeal, the LD CIT(A) has upheld the order of the AO with regard to deduction claimed in respect of cost of components of plant or machinery lying as Capital Work In Progress (CWIP) as on 1 April 2013 amounting to 248,65,65,041/- but allowed the claim amounting to Rs. 8,32,42,289/- with respect to assets which were eligible for depreciation at the rate of 100 per cent but installed and put to use for less than 180 days and hence claimed at 50%. The dispute therefore relates to only value of component of plant and machinery lying in capital work in progress as on 1st April 2013.

The learned AR submitted that assessee is entitled to deduction under section 32AC of the Act as: i. The term ‘plant’ has to be read in the manner in which it is generally understood and accordingly, a plant can be said to have been acquired on or after 1st April 2013 since it came into existence only after all the machinery and components were assembled and commissioned together. The plant was brought into existence from the components lying in CWIP only after 1st April 2013 when it

The intention behind introduction of section 32AC can be discerned from the speech of the Hon’ble Finance Minister while presenting the Finance Bill 2013, wherein the Hon’ble Minister stated as under: “New Investments 59. To attract new investment and to quicken the implementation of projects, I propose to introduce an investment allowance for new high value investments. A company investing `100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15 percent of the investment. This will be in addition to the current rates of depreciation. There will be enormous spill-over benefits to small and medium enterprises.”

The explanation regarding introduction of this new section in the Memorandum explaining the provisions of the Finance Bill, 2013 was stated under the head “Measures to Promote Socio-Economic Growth” and the opening portion of the relevant clause of the Memorandum read as under: “Incentive for acquisition and installation of new plant or machinery by manufacturing company” In order to encourage substantial investment in plant and machinery, it is proposed to insert a new section 32AC in the income tax Act….” [clause 5].

It is also worth noting that section 32AC was further amended by Finance Act, 2014 whereby subsection (1A) was introduced with effect

The memorandum explaining the provision of Finance (No.2) Bill, 2014 in respect of the aforesaid amendment stated as under:- “FINANCE (No. 2) BILL, 2014 PROVISIONS RELATING TO DIRECT TAXES Investment Allowance to a Manufacturing Company In order to encourage the companies engaged in the business of manufacture or production of an article or thing to invest substantial amount in acquisition and installation of new plant and machinery, Finance Act, 2013 inserted section 32AC in the Act to provide that where an assessee, being a company, is engaged in the business of manufacture of an article or thing and invests a sum of more than Rs.100 crore in new assets (plant and machinery) during the period beginning from 1st April, 2013 and ending on 31st March, 2015, then the assessee shall be allowed a deduction of 15% of cost of new assets for assessment years 2014-15 and 2015-16. As growth of the manufacturing sector is crucial for employment generation and development of an economy, it is proposed to extend the deduction available under section 32AC of the Act for investment made in plant and machinery up to 31.03.2017. Further, in order to simplify the existing provisions of section 32AC of the Act and also to make medium size investments in plant and machinery eligible for deduction, it is also proposed that the deduction under section 32AC of the Act shall be allowed if the company on or after 1st April, 2014 invests more than Rs.25 crore in plant and machinery in a previous year. It is also proposed that the assessee who is eligible to claim deduction under the existing combined threshold limit of Rs.100 crores for investment made in previous years 2013-14 and 2014- 15 shall continue to be eligible to claim deduction under the existing provisions contained in sub-section (1) of section 32AC even if its investment in the year

The term ‘acquire’ used in section 32AC has to be read in conjunction with the term ‘assets’, i.e. ‘plant’ or ‘machinery’, and not in isolation. A new ‘plant’ or ‘machinery’ can be said to have been acquired when the individual components of the plants are aggregated and installed together so that the resulting equipment takes the character of ‘plant’ or ‘machinery’ as is generally understood. “Acquisition” of plant or machinery cannot be read to mean mere purchase/ ownership/ possession of individual items or components of a plant or machinery. Restricting the meaning of acquisition of plant or machinery to mere purchase of individual components of ‘plant’ in piecemeal, which are accounted under the head ‘Capital Work-in-Progress’ will give absurd results not intended by the legislature. 237. The assessee is the largest cement manufacturer in the country having plants across various location in India. Huge plant and machineries are required for the manufacturing of cement. These plants are in the nature of complex machineries. Various components purchased by the assessee are to be assembled and commissioned together which takes substantial amount of time given the complexity, size and nature of the machinery/

In this regard it is worth noting the first proviso to sub-section (1A) of section 32AC. It is provided that where installation of the new assets are in a year other than the year of acquisition, the deduction under this sub-section shall be allowed in the year in which new assets are installed. This amendment was brought by the Finance Act, 2016. We are of the view that the intention of the legislature was to cure the discrepancy in the provision and to obviate the unintended hardship faced by the taxpayers in completing both the condition of “acquisition” and “installation” in the same year. Therefore, such proviso being curative in nature must apply retrospectively.

An analogy can also be drawn from the second proviso to section 32(1) which restricts the claim of depreciation to 50% in case of assets “acquired during the previous year” and “put to use” for a period of less

For the purpose of second proviso to section 32, the plant is considered as “acquired” only after all the machines and components are assembled and commissioned together and the plant is ready for use. The Revenue has never allowed depreciation on any individual component of plant/machineries acquired before the previous year since the process of assembling and commissioning was completed during the year. The claim of depreciation commences only from the day the plant is fully installed including on the value of component lying in capital work in progress but capitalised as plant and machinery on completion of installation. Thus, the meaning of the term “acquired” used in section 32 is considered as fulfilled only when the plant / machinery is “installed”. The language used in section 32AC being similar to the language used in second proviso to section 32(1), we must give the same interpretation.

We further note that the issue relating to availability of additional depreciation under section 32(1)(iia) wherein the phrase used is “acquired and installed after the 31st day of March” has been subject matter of litigation. The Coordinate Bench of this Tribunal in the case of

Again, the Coordinate Bench of this Tribunal in the case of JCIT vs. Lotus Energy (India) Ltd [2016] 68 taxmann.com 364 upheld the view of the taxpayer to allow additional depreciation in the year of installation. It was observed as under: “10. We have heard the rival contentions and also perused the material available on record. We have observed that Section 32(1)(iia) of the Act was amended by Finance Act, 2005. It is stated in the Memorandum to the Finance Bill 2005 that the provisions are amended in order to encourage new investment, the initial depreciation on new machinery and plant was proposed to be increased to 20 per cent from the existing level of 15 percent and consequently the initial depreciation will be available to all new plant and machineries except those referred to in the proviso to the clause (iia) of section 32 of the Act. The requirement of creating a minimum increase of 10 percent in installed capacity for availing the initial depreciation is also proposed to be eliminated. We have also observed that section 32(1)(iia) of the Act stipulates that new machinery and plant should be acquired and installed after 31-3-2005 by an tax-payer and a further sum equal to twenty percent of the actual cost of such machinery or plant shall be allowed as deduction. Provisions of Section 32(1)(ii) of the Act are

The Hon’ble Gujarat High Court in the case of PCIT vs. IDMC Ltd. [2017] 393 ITR 441 also took a similar view on the issue and has observed as under: “Applying law laid down by the Supreme Court in various decisions to the facts of the case on hand, if the submission on behalf of the revenue is accepted, it will lead to an absurd and unjust result and the purpose and object of granting the additional depreciation will be frustrated. If the contention on behalf of the revenue is accepted, in that case, the assessee shall never get the additional depreciation as provided under section 32(1)(iia). In the facts and circumstances of the case, the twin conditions of the acquired and installed shall never be satisfied in a year and therefore, the assessee shall never get any depreciation. The purpose and object of granting additional depreciation under section 32(1)(iia) is to encourage the industries by permitting the assessee setting up the new undertaking/ installation of new plant and machinery and to give a boost to the manufacturing sector by allowing additional depreciation deduction. Thus, as rightly held by the Tribunal the provisions of section 32(1)(iia) are required to be interpreted reasonably and purposively as the strict and literal reading of section 32(1)(iia) would lead to an absurd result denying the additional depreciation to the assessee though admittedly the assessee has installed new plant and machinery. Under the circumstances, no error has been committed by the Tribunal in allowing the additional depreciation at the rate of 20 per cent on the plant and machinery installed by the assessee after 31-3-2005 i.e. the year under consideration.”

The AR of the assessee also contended that if a strict interpretation is adopted for the word “and” used in the term “acquired and installed”, to understand it in its normal grammatical sense, i.e. a conjunctive, then there may be a large number of instances where the assessee, even after making required investment in plant and machinery, would not be able to claim deduction under section 32AC of the Act. The assessee may invest in designs, plans, drawings, bottles, books, etc. which are considered as “plant” for the purpose of section 32 of the Act. If the interpretation of the Revenue is accepted that only plant acquired and installed is eligible for deduction under section 32AC of the Act then, it would lead to absurd results as the aforesaid assets which have been considered by the Supreme Court and the High Courts falling within the meaning of “plant” would not be eligible for deduction under section 32AC of the Act since the aforesaid assets are incapable of installation. Designs, plans, drawings, bottles, books, etc. by their very nature are

It is fairly well settled law that where the word "and" as is understood leads to unintended results, then it should be interpreted to mean “or”. The Supreme Court in the case of CIT vs. Ram Kishan Dass 413 ITR 337 (2019) SC has held: “Secondly, the alternate construction of the proviso is that the expression "and for any good and sufficient reason" should be read to mean "or for any good and sufficient reason". As a matter of statutory interpretation, it is well settled that the expression "and" can in a given context be read as "or" (see in this context Ishwar Singh Bindra v. State of UP AIR 1968 SC 1450). This submission was opposed on behalf of the assessees by urging that in the context of sub-section (2A), it has been held by this Court in Sahara India (Firm), Lucknow (supra) that the word "and" is used in the conjunctive sense. Undoubtedly the expression "and" in subsection (2A) has been held to the conjunctive, while delineating the circumstances on the basis of which an opinion can be arrived at by the assessing officer. This would not necessarily furnish an index to how the expression "and" in the proviso to subsection (2C) should be construed. The interpretation of the expression must be based on the context in which it is used. In the proviso to sub-section (2C), the expression "and" is used in connection with the grant of an extension of time and not in the context of the formation of an opinion for ordering a special audit.” 247. We are, therefore, inclined to accept the contention of the AR of the assessee that the words “acquired and installed” have to be read as “acquired or installed” to give effect to the intention of the legislature.

In view of the above we have no hesitation to hold that the assessee is entitled to deduction u/s 32AC of the Act on the value of cost of components of plant or machinery lying as CWIP as on 1 April 2013 but installed during the financial year 2013-14. We therefore direct the AO to allow deduction as investment allowance u/s 32AC of the IT Act.

Ground no.5 of the appeal relate to short grant of TDS/TCS credit claimed by the assessee on the basis of certificates and for which entries are not found in Form 26AS.

This ground is similar to Ground no.4 of the assessee’s appeal in ITA No. 1413/Mum/2018 wherein we have directed the AO to grant credit

Ground no. 6 is general in nature and does not require separate adjudication and hence accordingly dismissed.

The assessee has filed additional grounds vide applications dated 14 January 2020 (Ground nos. 7 and 8) and 5 November 2020 (Ground no. 9). Similar grounds were filed as additional grounds for AY 2011-12 also in ITA No. 1413/Mum/2018.

Following the Supreme Court Ruling in the case of National Thermal Power Co. Ltd. Vs CIT (1998) 229 ITR 383, we admitted and adjudicated the additional grounds filed for AY 2011-12 since those were merely legal plea which did not require any factual investigation. Accordingly, we admit the additional grounds for AY 2012-13 filed by the assessee and have taken up the same for adjudication.

Additional Ground no. 7 and 8 relate to the claim of deduction towards education cess and secondary and higher education cess in computing the total taxable income.

These grounds are similar to Ground no.6 and 7 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal on this ground and directed the AO to allow the deduction towards education cess and secondary and higher education cess, to the extent of actual payment made by the assessee, in computing its taxable income. Following our decision in AY 2011-12, we direct the AO to allow the deduction of actual payment of education cess and secondary and higher education cess in computing the taxable income for this year as well.

Additional Ground no. 9 of the appeal relate to refund of DDT paid in excess of the rate prescribed under DTAA on dividend paid to the non- resident shareholders.

This ground is similar to Ground no. 8 of the assessee’s appeal in ITA No. 1413/Mum/2018 for AY 2011-12. We have allowed the assessee’s appeal in AY 2011-12 and have given direction to the AO to verify the assessee’s claim. In case the rate of tax as per tax treaty on dividend is lower and the rate of DDT paid by the assessee, the excess should be refunded to the assessee. Following our decision in AY 2011-12, we direct accordingly

These grounds are similar to Ground nos.1 and 2 of the Revenue’s appeal in ITA No. 2871/Mum/2018 and assessee’s cross objection in CO No. 129/Mum/2019 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assesse’s own case for earlier years. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this ground raised by the Revenue

Ground nos.3 and 9 of the Revenue’s appeal relate to availability of deduction under section 80IA of the IT Act with respect to the rail system developed, operated and maintained by the assessee, amounting to Rs.1,05,45,74,078/-. Ground nos.2 and 3 of the assessee’s cross objection is connected with this claim.

These grounds are similar to Ground nos.3 and 4 of the Revenue’s appeal in ITA No. 2871/Mum/2018 and assessee’s cross objection in CO No. 129/Mum/2019 for AY 2011-12 for AY 2011-12. We have already decided this issue in favour of the assessee by following the order of Tribunal in assesse’s own case for earlier years, particularly AY 2010- 11. Since the facts relating to this ground remain same, following our decision in AY 2011-12, we reject this ground raised by the Revenue.

Ground no. 4 to 6 of the appeal relate to relief allowed by the LD CIT(A) by deleting additions made by the AO under section 14A of the

We have dealt with the issue of disallowance of other expenses in Ground no. 5 of the Revenue’s appeal for AY 2011-12 in ITA No. 2871/Mum/2018. Relying on the order of the Coordinate Bench of this Tribunal in earlier years in the assessee’s own case as also the decision of Hon’ble jurisdictional High Court for AY 2008-09 (Revenue’s SLP against such order of the High Court is rejected by the Hon’ble Supreme Court), we hold that total disallowance for the purpose of section 14A should be restricted to Rs.73,27,969/- i.e. amount suo moto offered by the assessee.

Ground no. 7 and 8 of the appeal relate to claim of expenses on account of Employee Stock Option Scheme. Ground nos.5 and 6 of the assessee’s cross objection is connected with this claim

This issue has been subject matter of appeal in assessee’s own case for AY 2008-09. The Tribunal in AY 2008-09 had remanded back the issue to the AO with a limited direction to allow the appeal if the facts of the assessee matched with the facts in the case of Biocon Ltd. [251 ITR (Trib.) 602]. The relevant para of the Hon’ble Tribunal order is reproduced hereunder: “36. …. In our considerate view, the allowability of the claim of the assessee has to be considered afresh in the light of the findings of the Special Bench (supra). We therefore restore this issue back to the files of the AO. The AO is directed to consider the claim of the assessee in the light of the decision of the Special Bench of ITAT in the case of Biocon Ltd (supra) after making necessary

The facts and circumstances during the year under consideration remain the same. Respectfully following the order in the assessee’s own case for earlier year, we do not find any infirmity in order of the LD CIT(A) and accordingly dismiss the ground raised by the revenue. We direct the AO to allow the claim of the assessee if the facts of the assessee matches with the facts in the case of Biocon Ltd. We may add here that the case of Biocon has been now upheld by the Hon’ble Karanataka High Court in 131 taxmann.com 187.

Ground no. 10 and 11 of the appeal relate to the addition made by the AO regarding Corporate Guarantee commission in pursuant to the order passed by the TPO. Ground no.7 and 8 of the assessee’s cross objection is connected with this claim

We have decided this issue while adjudicating Ground No.6 to 11 of the Revenue’s appeal in ITA No.2873/Mum/2018 for AY 2013-14. Since facts in this year remain same with the one discussed earlier, we direct the AO to adopt 0.5% as an arms’ length consideration for the corporate guarantee issued by the assessee in favour of its AEs.

The grounds raised by the Revenue and the CO filed by the assessee is accordingly disposed off.

In the result appeals and Cross Objection of the assessee for Assessment Years 2011-12, 2012, 2013-14 and 2014-15 are partly